Opinion
No. CV 03 0826361 S
September 8, 2004
MEMORANDUM OF DECISION
This is an action brought by Steven and Rachel Wesley, who seek reformation of an automobile leasing document prepared by the defendant Schaller Subaru, Inc. ("Schaller") and assigned to the defendant Subaru Auto Leasing, Ltd. ("SAL"). The Wesleys claim that the leasing document did not contain the name of Rachel Wesley as an authorized driver, although both Steven Wesley and Schaller knew that she was intended to be the primary driver. Rachel subsequently was involved in a serious motor vehicle accident in the car, and she is the defendant in tort cases arising from the accident. Reformation, it is claimed, will require some responsibility in the tort cases on the part of SAL pursuant to § 14-154a of the General Statutes.
The facts are as follows. Steven Wesley ("Steven") was and apparently is an employee of Pratt Whitney Aircraft. For a number of years he worked with Pratt Whitney's customers.
He was living in Atlanta, coordinating with Delta Airlines, when he was transferred to Connecticut in the fall of 2000. He arrived in Connecticut before his wife and family moved. Prior to his family's relocating, he arranged for a car for his wife, Rachel. She is from Israel and was not accustomed to driving in snowy and icy conditions. Steven determined, then, that a Subaru Outback might be an appropriate car for her to drive.
Steven visited Schaller, a dealership, on October 21, 2000, and spoke with Joe Scott, a salesman, and Chris Mailhot, a sales manager. Though details of the conversations are understandably a bit murky, the thrust of the conversation was that Steven was interested in an Outback for his wife. At that point he was more interested in purchasing, as opposed to leasing. Mailhot accordingly had him fill out credit information on a form provided to Schaller by Sovereign Bank, which handled much of Schaller's auto purchase financing. There was no mention on this form of authorized drivers, because the concept doesn't arise in purchase contexts. Rachel was listed as a spouse and her income was shown. Were the transaction to be a purchase, and if Steven were to be the sole owner of the car, Rachel apparently would be relevant only for the purpose of determining eligibility for financing. At this point Mailhot knew that Rachel was intended to be the primary driver of the car.
Sometime between October 21 and October 24, Steven, probably after consultation with Rachel, who was still in Atlanta, changed his mind and decided to lease the car. He telephoned Schaller and most probably spoke with Mailhot. In any event, employees of Schaller transferred information onto lease application forms provided by SAL. The income information was simply transferred. On the line for authorized drivers (other than the named lessee), Keith Brick, a financial manager for Schaller who largely handled the leasing transaction, wrote in Steven's name. His stated purpose was to establish a Connecticut address for tax purposes. Steven was not present when Brick completed the form. Steven additionally had been required to supply insurance information; the information provided showed that the cars previously owned and insured had been in Steven's name.
Schaller faxed the information to SAL and the lease was approved. Steven came to Schaller on October 24 to sign the documents. He may have met with Mailhot; he almost certainly met with Brick. Steven had sufficient opportunity to read the documents; the evidence showed that Steven was engaged in reasonably sophisticated employment and that he was fully literate. He was not pressured in any way. There also, however, is no evidence that the authorized driver provision was discussed in any way at any time during the entire transaction. A credit for the trade-in of the minivan Rachel was currently driving was allowed even though the car was not physically available for inspection. All parties knew that the van was in Atlanta with its driver.
Shortly after the transaction was completed Rachel traveled to Connecticut to visit her husband During that visit, Shaller, in the person of Joe Scott, gave her a demonstration drive in a car like the one that had been leased. The actual leased car was driven to Atlanta by Mailhot, who combined business with pleasure by dropping off the Subaru in Rachel's garage in the Atlanta area. He returned in the trade-in vehicle.
For most purposes, Schaller is not an agent of SAL. The dealership agreement so provides, and testimony of both Arthur Schaller of Schaller and Charles Smith of SAL so indicated. SAL was in the financing business and Schaller was in the automobile dealer business. Schaller was not obligated to steer leases to SAL. It is also true that with regard to leases which were financed by SAL, Schaller had several contractual obligations. It could use only forms provided by SAL and it was required to follow SAL's protocols. The rates were determined by SAL and published periodically in guidebooks. Requirements for credit were established by SAL. Both Schaller and Smith indicated that the leasing procedures were quite strictly controlled by SAL, though both carefully avoided confirming any agency relationship other than in the course of "titling" cars whose titles were assigned to SAL. Paragraph 7 of the leasing agreement provided:
Company hereby appoints and grants to Dealer Power of Attorney to execute and file on company's behalf Leases approved by Company and any and all statements or other documents required to be filed under the Uniform Commercial Code, or any other law or regulation in connection with the title of the Company in or to any Lease and Vehicle subject thereto.
In any event, Rachel returned to Atlanta and then moved with the rest of the family to Connecticut, and the Subaru came with them. In January 2001, the Subaru was involved in an accident in Connecticut while Rachel was driving. Apparently serious injuries, including one death, resulted, and Rachel has been sued by several parties, including her husband as next friend and personal representative of an estate. SAL has been named as a defendant pursuant to § 14-154a, and it has moved for summary judgment on the ground that Rachel was not an authorized driver. See Pedevillano v. Byron, 231 Conn. 265, 270 (1994). In response, Rachel and Steven Wesley brought this action in an effort to reform the contract so that Rachel is an authorized driver.
The plaintiffs claim that Schaller, in the course of executing the leasing agreement, was acting as an agent of SAL. The failure to include Rachel as an authorized driver was, it is alleged, a result of mutual mistake, scrivener's error or unilateral mistake combined with inequitable conduct of the other side. The defendants deny agency and the elements required for reformation; they also allege several defenses including waiver, estoppel, laches and unclean hands. SAL additionally alleges lack of privity, failure to state a claim on which relief can be granted, and a denial that it ratified or authorized any acts or omissions referred to in the complaint.
The law regarding reformation has been quite well defined:
A cause of action for reformation of a contract rests on the equitable theory that the instrument sought to be reformed does not conform to the real contract agreed upon and does not express the intention of the parties and that it was executed as the result of mutual mistake, or mistake of one party coupled with actual or constructive fraud, or inequitable conduct on the part of the other. Moffett, Hodgkins Clarke Co. v. Rochester, 178 U.S. 373, 385, 20 S.Ct. 957, 44 L.Ed. 1108 [1900]; Patalano v. Chabot, 139 Conn. 356, 359, 94 A.2d 15 [1952]; Home Owners' Loan Corporation v. Stevens, 120 Conn. 6, 9, 179 A. 330 [1935]; 27 Am.Jur.2d 555, Equity, 33; 45 Am.Jur., Reformation of Instruments, 5842, 621 62; 76 C.J.S. 375, Reformation of Instruments, 30." Greenwich Contracting Co. v. Bonwit Construction Co., 156 Conn. 123, 126, 239 A.2d 519 (1968); see also Rodie v. National Sturety Corporation, 143 Conn. 66, 69, 118 A.2d 908 (1955).
. . .
Reformation is not granted for the purpose of alleviating a hard or oppressive bargain, but rather to restate the intended terms of an agreement when the writing that memorializes that agreement is at variance with the intent of both parties . . . Equity evolved the doctrine because an action at law afforded no relief against an instrument secured by fraud or as a result of mutual mistake." George Backer Management Corporation v. Acme Quilting Co., 46 N.Y.2d 211, 219, 385 N.E.2d 1062 (1978). The remedy of reformation "is appropriate in cases of mutual mistake — that is where, in reducing to writing an agreement made or transaction entered into as intended by the parties thereto, through mistake, common to both parties, the written instrument fails to express the real agreement or transaction." (Citations omitted.) Home Owners' Loan Corporation v. Stevens, supra, 9-10; see Restatement Second, Contracts 297 (Tentative Draft No. 10). In short, the mistake, being common to both parties, effects a result which neither intended. See, e.g., Mishiloff v. American Central Ins. Co., 102 Conn. 370, 374, 128 A. 33 (1925); Snelling v. Merritt, 85 Conn. 83, 100, 81 A. 1039 (1911).
CT Page 13447 Lopinto v. Haines, 185 Conn. 527, 531-32 (1981).
The burden of proof as to a claim of reformation is that a claim has to be proven by clear, convincing and substantial evidence. Id., 534. Our Supreme Court has cautioned that actions to reform the clear written provisions of a contract are to be viewed with caution and relief should be granted only where the evidence is clear. E.g., Greenwich Contracting Co. v. Bonwit Construction Co., 156 Conn. 123, 126 (1968). However, "[r]eformation is appropriate in cases of mutual mistake — that is where, in reducing to writing an agreement made or transaction entered into as intended by the parties thereto, through mistake, common to both parties, the written instrument fails to express the real agreement or transaction." Home Owners' Loan Corporation v. Stevens, 120 Conn. 6, 9-10 (1935). If the parties actually intended different contracts, then of course reformation would fail. The concept of reformation is that there must have been an agreement, or, more pedantically, a "meeting of the minds," prior to the reduction to writing, and, unrecognized by both sides at the time, the writing must have been prepared in a way that alters or does not reflect the pre-existing agreement. See, e.g., Hoffman v. Fidelity Casualty Co., 125 Conn. 440, 443-44 (1939). It is not surprising, given the narrow range of cases to which the remedy of reformation appropriately affixes, that our appellate law in the area consists largely of examples of instances in which reformation is inappropriate.
An action for reformation is thus different from interpretation of a contract through the use of parol evidence. In the latter situation, if the written contract is not clear as to its application, evidence regarding the intention of the parties may be admissible.
After consideration of all the evidence, especially that of Mailhot, I find that this is one of those rare cases in which reformation is compelled. It is absolutely clear that Steven intended Rachel to be the primary driver of the car. It is absolutely clear that Mailhot knew of and agreed with that intention. The very clear mutually held understanding was that Rachel was the primary driver of the Subaru. Mailhot even delivered the car to Georgia for her use: this act was clearly contrary to the contractual term forbidding, in essence, her from driving the car. Mailhot was undoubtedly an agent of Schaller. The insurance information did not confirm the understanding; nor did it contradict it. I find corroborative, though not in itself particularly persuasive, Scott's later taking Rachel for a drive in a car like the one she would be driving.
Through a series of happenstances, the wrong name was placed in the written document. See, e.g., Murphy's Law. Employees (and agents) of Schaller transferred information from the bank document, to which the concept of authorized driver was not material, to the leasing document, without asking anyone about it. At least part of the reason for that may have been Mailhot's understanding that a spouse of a named lessee was automatically an authorized driver, so no special notation need be made. I stress at this point that the errors were entirely innocent and were made primarily in an effort to maximize the customer's convenience. In any event, the clear agreement of both Schaller and Steven was that Rachel would be the primary driver of the Subaru. Neither side appreciated the consequences of Rachel not being included.
At the time of signing, a Schaller employee, probably Brick, gave the documents to Steven and gave him every opportunity to read them. Given his prior history with Mailhot and Scott, at a minimum, Steven presumably didn't give the authorized driver provision a second thought. It is true that a consumer generally has a duty to read the contract and Schaller had no duty affirmatively to point to any provision. See, e.g., Smith v. Mitsubishi Motors Credit of America, Inc., 247 Conn. 342, 351-52 (1998). The duty carefully to examine the document may be somewhat qualified:
"The general rule is that where a person of mature years and who can read and write, signs or accepts a formal written contract affecting his pecuniary interests, it is [that person's] duty to read it and notice of its contents will be imputed to that person] if he negligently fails to do so; but this rule is subject to qualifications, including intervention of fraud or artifice, or mistake not due to negligence, and applies only if nothing has been said or done to mislead the person sought to be charged or to put a [person] of reasonable business prudence off . . . guard in the matter." Ursini v. Goldman, 118 Conn. 554, 562, 173 A. 789 (1934); see also King v. Industrial Bank of Washington, 474 A.2d 151, 155 (D.C.App. 1984).
First Charter National Bank v. Ross, 29 Conn.App. 667, 671 (1992).
Here, I find "a mistake not due to negligence," where based on prior conversations, and actions of Schaller agents and employees, Steven reasonably assumed that his wife was authorized to drive the car.
I specifically do not find unilateral mistake and inequitable conduct. Ordinarily, that sort of inequitable conduct occurs when one party knows of the mistake at the time of execution and knowingly lets the other side err. See, e.g., Home Owners' Loan Corp., supra, 11. Nor are the requirements for scrivener's error met.
Schaller prepared the document with the mistake in the term. The next issue is whether Schaller was acting as the agent for SAL in that activity. I agree with Schaller that no effective relief can be granted as to it, because it owned the automobile only briefly after the transaction with Steven and perhaps then only momentarily. It assigned title to SAL, and Schaller was effectively removed from the transaction after it transferred title.
I find that Schaller was the agent of SAL for the limited purpose of executing the leasing documents. As noted above, the forms were prescribed and apparently provided by SAL, and SAL decided what information had to be gathered and how it was to be reported. Schaller, in effect, was the representative of SAL for the purpose of executing the lease. Indeed, the dealership agreement can be easily read in such a way that agency is express. By stressing relevant words in the agreement, we see that SAL "appoints and grants to dealer power of attorney to execute . . . leases approved by the company . . ." Paragraph 7. The contention of SAL that the paragraph is limited to the power to "title" vehicles is at best questionable.
Agency is created where several conditions are met:
"Agency is defined as the fiduciary relationship which results from manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act . . . Restatement (Second), 1 Agency § 1 [1958]. McLaughlin v. Chicken Delight, Inc., 164 Conn. 317, 322, 321 A.2d 456 (1973). Thus, the three elements required to show the existence of an agency relationship include: (1) a manifestation by the principal that the agent will act for him; (2) acceptance by the agent of the undertaking; and (3) an understanding between the parties that the principal will be in control of the undertaking. Restatement (Second), 1 Agency § 1, comment b (1958)." (Internal quotation marks omitted.) Gordon v. Bridgeport Housing Authority, 208 Conn. 161, 184, 544 A.2d 1185 (1988); Botticello v. Stefanovicz, 177 Conn. 22, 25, 411 A.2d 16 (1979). A principal is generally liable for the authorized acts of his agent; 1 Restatement (Second), Agency § 140, p. 349 (1958); and in certain circumstances, both the agent and the principal may be liable for the acts of the agent. 2 Restatement (Second), Agency § 322, p. 72.
CT Page 13450 Gateway v. Dinoia, 232 Conn. 223, 239-40 (1995).
Some of the factors listed by the Second Restatement of Agency in assessing whether such a relationship exists include: whether the alleged principal has the right to direct and control the work of the agent; whether the agent is engaged in a distinct occupation; whether the principal or the agent supplies the "instrumentalities, tools, and the place of work"; and the method of paying the agent.
. . .
In addition, [a]n essential ingredient of agency is that the agent is doing something at the behest and for the benefit of the principal." (Citations omitted.) Leary v. Johnson, 159 Conn. 101, 105-06, 267 A.2d 658 (1970). Finally, the labels used by the parties in referring to their relationship are not determinative; rather, a court must look to the" operative terms" of their agreement or understanding.
Beckenstein v. Potter and Carrier, Inc., 191 Conn. 120, 133-34 (1983).
The criteria have been met in this case. The dealership agreement as well as the course of conduct are clear indications that SAL has manifested that Schaller will act for it as to executing leasing documents. By the same token, Schaller has clearly accepted the undertaking and the clear understanding is that SAL controls the leasing requirements. Further, SAL provided the instrumentalities (the forms) and the guidelines for performing the obligation, and SAL clearly benefitted from the arrangement. I note that of course the agency relates only to the narrow areas addressed.
The next issue is whether Steven and Rachel Wesley have standing to assert the relief sought. The parties are agreed on the general principles regarding standing.
"Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless [one] has, in an individual or representative capacity, some real interest in the cause of action . . ." (Internal quotation marks omitted.) Stamford Hospital v. Vega, 236 Conn. 646, 657, 674 A.2d 821 (1996). "Standing is established by showing that the party claiming it is authorized by statute to bring suit or is classically aggrieved." Steeneck v. University of Bridgeport, 235 Conn. 572, 579, 668 A.2d 688 (1995). The fundamental test for establishing classical aggrievement is well settled: "[F]irst, the party claiming aggrievement must successfully demonstrate a specific personal and legal interest in the subject matter of the decision . . ." (Internal quotation marks omitted.) Med-Trans of Connecticut, Inc. v. Dept. of Public Health Addiction Services, 242 Conn. 152, 158-59, 699 A.2d 142 (1997); accord State Medical Society v. Board of Examiners in Podiatry, 203 Conn. 295, 299-300, 524 A.2d 636 (1987). Second, the" party claiming aggrievement also must demonstrate that its asserted interest has been specially and injuriously affected in a way that is cognizable by law." United Cable Television Services Corp. v. Dept. of Public Utility Control, 235 Conn. 334, 343, 663 A.2d 1011 (1995).
Crone v. Gill, 250 Conn. 476, 479-80 (1999).
"Where a plaintiff lacks standing to sue, the court is without subject matter jurisdiction." Steeneck v. University of Bridgeport, 235 Conn. 572, 580, 668 A.2d 688 (1995)." Standing is the legal right to set judicial machinery in motion. One cannot rightfully invoke the jurisdiction of the court unless [one] has, in an individual or representative capacity, some real interest in the cause of action, or a legal or equitable right, title or interest in the subject matter of the controversy." (Internal quotation marks omitted.) Tomlinson v. Board of Education, 226 Conn. 704, 717, 629 A.2d 333 (1993). Standing, however, "is not a technical rule intended to keep aggrieved parties out of court . . . Rather it is a practical concept designed to ensure that courts and parties are not vexed by suits brought to vindicate nonjusticiable interests and that judicial decisions which may affect the rights of others are forged in hot controversy, with each view fairly and vigorously represented." (Internal quotation marks omitted.) Carl J. Herzog Foundation, Inc. v. University of Bridgeport, 41 Conn.App. 790, 794, 677 A.2d 1378 (1996), rev'd on other grounds, 243 Conn. 1, 699 A.2d 995 (1997).
Dime Savings Bank, Wallingford v. Arpaia, 55 Conn.App. 180, 183-84 (1999).
The gravamen of the defendants' position on standing is that no effective relief can be gained from this action, for a variety of reasons. Among them is an argument that because of an indemnification clause, any damages awarded against SAL will circle back to the plaintiff(s) in this action; thus, any advantage gained by having SAL added as a defendant will be negated in practice. The short answer is that although this outcome may in fact occur, it also may not, and standing does not depend on sureness of outcome but only on the possibility of gaining meaningful relief. The obvious gain for Steven and Rachel, especially Rachel, is that she has been sued as a result of a serious accident. At least in theory, she as a putative tortfeasor is personally liable for any amounts beyond the limits of any insurance policy. If SAL is liable by virtue of § 14-154a, then her personal exposure is concomitantly decreased. Although this benefit may not in fact occur, it is at least a possibility and gives her a very real stake in the outcome. At this point, at least so far as the evidence is concerned, the positions of both the plaintiffs and the defendants are somewhat speculative, but standing does not require certainty.
I agree with other positions of the defendants regarding standing: for example, clearly there is no point in Rachel's now being declared an authorized driver for the purpose of present ability to operate the vehicle, because apparently it no longer exists. But once standing exists because of one rationale, the others are of no moment.
I have considered the defendants' special defenses and do not sustain them. The defenses which have been preserved through briefing are laches, waiver, estoppel and unclean hands. The argument as to laches is that waiting from October 24, 2000, the day the leasing documents were executed, until 2003 to assert the claims constitutes unreasonable delay. Ordinarily a wait of a period of time less than the applicable statute of limitations for contract actions would not be considered inequitable and indeed might be prima facie proper. SAL claims, however, that it has been prejudiced in its investigation; that is, had Rachel been listed it might not have approved her as an authorized driver. SAL's position is defeated by two considerations: every witness who testified on the matter stated, to greater or lesser degrees of certainty, that spouses were routinely listed as authorized drivers and were routinely approved. Further, SAL presented no evidence at the hearing showing that it would not have approved her. The only evidence was that it was not necessarily obligated to approve her.
As to estoppel, I find no evidence that Steven misled Schaller or SAL to its detriment, for much the same reason that I have rejected the suggestion that Schaller acted inequitably. There was no evidence that Steven intentionally failed to mention Rachel in order to induce SAL to approve the leasing arrangement, and no evidence that he intentionally remained quiet when he saw that only he had been named as an authorized driver. Rachel's name was omitted because of a mistake which was caused by a series of unusual events in the course of this transaction. Similarly, I find no intentional waiver and no "unclean hands" on the part of either Steven or Rachel.
I think it may be appropriate to address some of the concerns expressed by the defendants. First, I do not believe that this decision is precedent in any way for the proposition that contracts in general and authorized driver clauses in particular are to be easily reformed. Most of the time they are not subject to reformation. This case presents a most unusual set of circumstances where the intention was expressed by both sides, and an unusual course of events resulted in Steven's never having been asked about authorized drivers and he never filled out the form himself. He did have the opportunity to read the form, but that occurred after conversations with Mailhot, at a minimum, and conduct which reasonably led Steven to believe that there was no difficulty with Rachel's being the primary driver.
Although I do not squarely reach the question, it would seem that the defendants may be estopped from asserting a failure on the part of Steven to realize the need to include Rachel as an authorized driver, because conduct on their part at the very least contributed to his not realizing the mistake.
It is also true that there was no "meeting of the minds" one way or the other as to whether Rachel would be specifically listed on the form. This is inconsequential, however, because the operative question is whether there was a meeting of the minds as to Rachel's driving the car. Clearly there was.
Finally, the defendants have argued that there was no meeting of the mind as to insurance coverage, and there is no other practical relief sought. Again, the only agreement which is to be included by reformation is the provision regarding the authorized driver. Other consequences may or may not follow.
Section 14-154a does not, of course, provide insurance coverage, but rather acts as a surety. This is the justification allowing indemnification actions against lessees. Smith v. Mitsubishi Motor Credit, supra.
The contract is ordered to be reformed by including the name of Rachel Wesley as an authorized driver.
Beach, J.